The traffic rule about-turn has some salient economic parallels, writes Tim Hazledine, Professor of Economics at the University of Auckland.

Economists make forecasts, not because they know, said the great economist J.K. Galbraith, but because they're asked. To rub it in, he also said: "Economic forecasting was invented to make astrology look respectable."

Well, I am an economist, nobody has even asked me, I think astrology is rubbish and I'm still going to stick my neck out and make a forecast. My prediction is this: a certain change in the law of the land which will come into effect on Sunday will be remembered in history as one of the wisest and most popular policies enacted by the current government.

The change is the reversal of the give-way-to-right-turning-traffic rule that has been annoying and confusing motorists in New Zealand for the past 35 years. From next Sunday, we will rejoin the rest of the civilised world and require vehicles turning across oncoming traffic to give way.


The present law was in place when I returned to New Zealand from my extended OE, in 1992, and 20 years on, I've still not fully adjusted to it, by which I mean that, in any give-way situation involving an unthinking, split-second decision, my instinct is to do the "wrong" thing.

Okay, there's probably a joke about economist drivers, too: "On the one hand, I should do this; but on the other, I should ... oops, crash!" However, in this instance I believe we are at one with the crowd, which is why I so confidently predict the smooth success of the law change.

It is quite interesting, with serious implications for economic policymaking. When I found out about the give-way rule, I was sure that it must be part of the Rogernomics "reform" package of the late 1980s, and was surprised to learn that the change had been made in 1977.

The point is that the give-way rule fits in to the neo-liberal ideology that animated the Rogernomes, namely, that a narrowly defined concept of economic efficiency is the only defensible goal for government policy on all matters, public or private. As one of the traffic engineers responsible for the 1977 change explained recently in the Herald, the idea was that vehicles sitting in the middle of the road waiting to turn right into a side road typically had to wait longer, whereas the kerb-hugging left-turner had greater opportunities to make their move.

So, in terms of efficiency, which in cost-benefit analysis is measured as seconds of delay, the proper thing to do was to minimise total time waiting of all traffic, and this was to be achieved by getting the right-turning traffic off the main road as quickly as possible.

Furthermore, this would be statistically fair because, over the long haul, all motorists will find themselves in both left- and right-turning situations fairly randomly.

This does sound sensible, and I would not claim that in 1977, I would have been smart enough to predict it wouldn't work. But it has not been a success, which is why the Government is finally changing the rule.

So what went wrong? The lesson is this: fairness in the statistical sense is not enough. People have views on the morality of particular situations, and these views affect their behaviour.

So, the left-turning motorist having to give way to the vehicle crossing the traffic thinks: "They're the one causing all the trouble here! Why should it be me who has to give way, when I can do my little turn without holding up anyone?" And then, when we are in the right-of-way situation, we may feel guilty and attempt to wave on the left-turner ahead of us - a most dangerous thing to do.

Result: frustration, confusion, collisions, a few additional fatalities each year; all adding up - even in cost-benefit efficiency terms - to subjective and objective costs outweighing the supposed gains of fewer total minutes spent waiting in traffic.

The economic reforms of the 1980s made this mistake on the grand scale: radical privatisation, deregulation, liberalisation - all in the name of efficiency, but delivering instead the lowest economic growth rate of all OECD economies through the 1990s.

Equal opportunity, even if achieved, is not enough. We care about actual outcomes as well, and our outcomes were bad in many dimensions, especially the widening of the distribution of income. The moral we are now struggling to take on is that efficiency and fairness cannot be separated - if people don't feel good about the fairness, they won't do the stuff that delivers the efficiency.

Enough of moralising. The new law comes in on Sunday, and I want to be ready for it. Mindful of my limitations as economist-driver, I'm now going to get the car out and hit the streets to put in some practice in advance. After all, as the Rogernomes said when corporatising 24 state-owned assets in as many months: if you are certain you're on to a good thing - hey, why wait?